6. PFI Private Finance

No more PFI contracts please.

Birmingham Highways Maintenance PFI See the potholes. NB the second defect shown I have got out of order see note on screen.

Private Finance Initiatives are a device for the government to fund vote winning public infrastructure like schools and hospitals when there is no public money to pay for them and without it appearing on the government accounts as part of the national debt which we’ve agreed not to let get out of hand. But this is a bit of a dodge.

The school or hospital is built and the building is run (ie just the building maintenance and security – not the doctors nurses, or teachers etc) for a period of, typically, 35 years by a consortium including a building company, a property maintenance company and a financier. It is free until it is opened and running. Then there’s a regular payment to be made to the consortium for the 35 years or so. The total sum paid is hugely more than than the cost of building and running it the conventional way. For instance Birmingham’s new QE Hospital is going to cost nearly £1 million a week for 35 years.

It is terribly hard to alter the buildings even in minor ways and it may have to go through a chain of lawyers to get it done which is laborious and costly.

There’s now a secondary market for such contracts so that the payments may very well be made not to the original consortium but someone else to whom they sold the contract.

If the local state health or education providers have a shrinking budget the PFI repayments still have to be paid so they take a higher and higher proportion of the total budget and other things have to be cut to pay the bill.

Details of such deals tend to be subject to commercial secrecy despite the facility being in the public service which seems to be an unsatisfactory arrangement which may hamper scrutiny.

It is recognised by the current government as a really bad way to fund procurement of public infrastructure. … but they are still doing it and the major parties blame each other for introducing it.

The answer is to have a buoyant enough economy not to have to engage in this dubious financing arrangement. For that to happen we have to stop the banks creating our money supply as their own property and we have to start earning a living on the world scene. They we will have money in the national kitty to pay for schools and hospitals outright up front.

The present system amounts to our generation building stuff and deferring payment to our children’s and grandchildren’s generation which isn’t really fair!